Seoul Administrative Court-2017-Guhap-5852 ( November 03, 2017)

First of all, the beneficiary shall not be deemed joint business operators, and since the building is sold after the trust is terminated, the trustee shall not be liable to pay value

Since a project operator and the priority beneficiary cannot be seen as joint business operators, the priority beneficiary has no joint and several tax liability according to the joint business, and the trustee is not liable for value-added tax because the trust for the trust property is terminated and the project operator sells the building

Article 25 of the Framework Act on National Taxes

2017Nu83753 Revocation of Disposition of Imposition of Value-Added Tax

AA Bank, Inc.

BB Director of the Tax Office

April 03, 2018

April 24, 2018

1. The defendant's appeal is dismissed.

2. The costs of appeal shall be borne by the Defendant.

1. Purport of claim

The Defendant’s disposition of imposition of value-added tax of KRW 4,741,451,610 (including additional tax for unfaithful payment, KRW 1,773,548,014) for the second period of 2010 against the Plaintiff on June 1, 2015 is revoked.

2. Purport of appeal

The judgment of the first instance is revoked, and the plaintiff's claim is dismissed.

1. Quotation of judgment of the first instance;

The reasoning for the court’s explanation on this case is as stated in the reasoning of the judgment of the court of first instance, except for the addition of the following to the judgment of the court of first instance. Thus, this case is cited in accordance with Article 8(2) of the Administrative Litigation Act and the text of Article 420

○ The following shall be added to the 7th decision of the first instance court under the 10th decision:

C) The Defendant asserts that the sales price of the instant building was paid to the sales price management account managed by the Plaintiff, and at the same time, the documents necessary for the registration of termination of trust and transfer of ownership are issued to the buyer. Thus, this is identical to the case where the trustee directly disposes of the trust property and settle the price to the preferred beneficiary, and the Plaintiff and CCC have the purpose of evading beneficiary taxation, such as providing that “the truster shall report and pay the taxes related to the trust property” under Article 3 of the Trust Contract, and thus, the actual supplier of the instant building should be deemed the Plaintiff even if based on such point.

A taxpayer may choose one of the several legal relationships in order to achieve the same economic purpose in conducting economic activities, and the tax authority shall respect the legal relationship chosen by the parties, barring any special circumstance. Moreover, the outcome after multiple stages of transactions may involve not only compensation for risk such as losses, but also external factors or acts. As such, a taxpayer shall not be subject to taxation by readily concluding that the substance is a single act or transaction after multiple stages of transactions (see, e.g., Supreme Court Decision 2017Du57516, Dec. 22, 2017).

In this case, the lender including the Plaintiff and CCC, and DD Construction concluded the instant agreement with the EEE and the CCC concluded the instant sales contract with the EEE. Meanwhile, there is no circumstance to deem that the most act or unreasonable transaction form was involved in the instant transaction, as it is a series of transactions conducted by the parties chosen by the parties, including the Plaintiff, to implement the instant project, to loan the instant building construction cost to the lender including the Plaintiff, to sell the instant building, to sell the instant building, and to secure the loan to the lender.

In addition, Article 3 of the Trust Contract of this case provides that "the truster shall report and pay the taxes related to trust property" to the truster, who is the main agent of the project of this case, appears to be responsible for the cost of property tax, etc. on trust property, and it is difficult to deem that there exists such provision to have been a purpose to avoid the transfer of the right to substantially control the sale and purchase, etc. of the building of this case to the trustee or the beneficiary taxation on the trustee. In addition, even if the payment of the purchase price and the termination of the trust contract and the transfer of ownership are made on the same day, it is clear that there is a logical preemptive relationship in the transfer registration of ownership, and the cancellation of the trust registration becomes clear, and the fact that the trust contract is made simultaneously with the payment of the purchase price and the cancellation of the trust

Therefore, since the result of the series of transactions in this case substantially becomes similar to the case where the trustee directly disposes of the trust property and settle the price to the person with priority interest, the supplier of the building in this case cannot be viewed as the plaintiff, the defendant's assertion is without merit.

○ On the 8th judgment of the first instance court, the following shall be added:

In addition, lending of funds on the premise that a financial institution will use it for a specific purpose belongs to a type of normal loan, and the use of the loan is limited to the purpose of the new construction project of the building of this case, and it cannot be a basis for deeming the loan as a substantial investment. Even if the amount issued as a certificate of beneficial rights for beneficiaries reaches 130% of the loan amount, priority interest under the trust contract of this case is limited to the principal and interest of the loan and damages for delay, and thus, the above amount issued as a certificate of beneficial rights is limited to the principal and interest of the loan and damages for delay, and therefore, it is only meaningful to set the upper limit of the principal and interest of the loan and damages for delay (Article 8

2. Conclusion

Therefore, the judgment of the first instance court is just, and the defendant's appeal is dismissed as it is without merit.

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